Jim Grant: "Central Banks Have Over-Egged The Financial Pudding"

The anchoring bias in the world's major sovereign bond markets (most notably those that have printing presses) is tremendous. As Jim Grant notes during this interview with Lauren Lyster, the blind indifference to the possibility of rising interest rates now is extremely similar to the indignance to the possibility of interest rates falling during the 1970s and 80s. In a broad and insightful few minutes Grant sheds a critical light on the similarities between then and now and fears that our unshakable confidence in the ability of the PhDs running our world monetary policy is false and that the market will eventually win out. The fear that is dominant among central bankers is indeed that of deflation and there is little to no fear of inflationary concerns and notes that there is a less than small probability that the world falls out of love with the US government's financial position. The truly humbling lesson of cycles past, he notes, is that they don't issue a press release (or ring a bell) at the turning point. "Things can remain seemingly excessive, until you turn your back and the reversion to some sort of mean begins." Grant believes we are approaching that, if not having already begun, that path back to reasonableness in interest rates. Grant continues with a discussion of potential income-generating ideas, his views on Bernanke's miscalculcations and most recent regime shift, the concerning idiocy of Japan (who seemingly can "neither procreate, nor re-inflate"), MMT 'price controls', and the path to total central planning.

The interview with Grant starts around 3:00 in with a discussion of the market's psychological similarities to the 1970s and 80s...

...at around 11:45 Grant considers Bernanke's regime shift (with a critical insight that "The Thing You Want To Measure Somehow Disappears When You Try To Measure It" - to wit inflation's anchor during the 2000s when house prices were going sky-high...

...at around 17:00 Grant discusses the craziness of world central bankers and especially Japan with their new leader (about to be elected) - quote of the day "The Japanese, seemingly, can neither procreate or reinflate"

...at 20:00, Grant reflects on the endgame and Bernanke's proverbial helicopter drop and how Japan is the leading indicator

...at 21:10, Grant addresses the MMT crowd... and extends on at around 23:00 to discuss the path to broad-based central-planning - which has all too much in common with what we used to call 'Red China'

Here is a blog I just finished showing the relationship between spending, taxes, and deficits. It ties into this nicely and the graphs are split up into 1947-71 and 71-2012 so you can see a before and after of the Bretton Woods system.

It is amazing to me how consistent ZH posters and commenters both, embracing the concept that we left normal long behind and this all uncharted territory, somehow forget all that when talking about bonds.

Look, guys, the Bernake Put is on bonds, not stocks. He Has Explicitly Said He Is Buying Bonds. He is a guaranteed bid under them. Why would the price fall? He owns them all. Who else can sell? No one. If no one can sell, and he's buying, how can the price fall?

It can't. That's why rates this time last year were about 2%, and now they're 1.7%. 30 bps reduction in rates and if you held bonds you made big money. There's no reason to think that doesn't continue 2013. In fact, even more so. He's buying more in 2013 than he did in 2012.

Besides all of which, as regards crowded trades and contrarianism, has anyone seen any CNBC guest in weeks, or months, who was NOT saying SELL TREASURIES?

Chicken littles that lost their A$$ since '09 have been in the "safety" of Treasuries, missing the entire climb up.

Interest rates CAN'T go lower. When they rise, these same "less than inflation" collecting morons will pay the penalty to leave that "safe" investment early, to chase the higher % "safety" of Treasuries. Completing the ONLY strategy possible to LOSE money between late '08 and now.

So what is grants point? No currency crisis? no hyperinflation? The world will still have faith in u.s. financial instruments? No end to the dollar reserve reign?? I dont see much beef from him.................

I still listen to schiff. His last few video blogs and his radio show he is back to his old self. He had smoke coming off his head last week. He does have a precious metals aspect to his business. Maybe that has something to do with it. I do believe that a lot of these guys have started watering down their message. Bill Gross is the worst offender. Santelli is right there with him. I personally think these guys realize all it takes is one firm to start selling bonds and this thing collapses. These firms also know that they would be committing mass suicide so they must all have made some pact not to. I still have no idea if we have 3 months, 3 years, or an orwellian nightmare of decades of this ahead.

I'm hangin in Yen. Glad Kito is back. He always had a different take than I did and I see merit in it. It's good to compare notes.

Damn, you are obsessed with being somebody. Get over yourself. You think if that woman knew "the truth", she'd get all weak in the knees around you? Keiser might well be a bozo, but glass house residences and all that. Just sayin'.

As for those who are enamored of this TV talking head Lyster, might I suggest getting a couple of articles off Bloomberg, then have your wife or girlfriend stick her head inside an old big box TV and read to you. That should spice up the love life.

Finally, as for that piece of Putin Propaganda called RT, anybody wonder why its website cannot be accessed on Tor and that it leaves LSOs on your computer to keep tabs on visitors? Anybody also know why the network just happened to overlook Putin's new draconian security law passage? No doubt it was just an oversight in a busy news decade.

really? Including when James Turk or James Rickards are interviewed? James Rickards has even co-hosted Capital Account. You think it's easy to get his time? He even consults for the Pentagon. Does your wife have that kind of pull?

Neglecting the radioactive holocaust of Fukashima (Fuku?) the only really good return you can get out of Japan is probably living there. Sounds the perfect place - tons of easy capital and no inflation; who cares if no one is making profit? Large profits are just an indicator of how far technical progress is away (due to diminishing marginal returns on technology) from the maximum.

Eventually, some "Enterprising Speculator" running a giant hedge fund with "billions under management" will sweep her off her feet, offer her a monthly stipend of $25,000/mo. plus an AMG Mercedes, and put her up in a luxury apartment overlooking Park Avenue rent free.

yall niggas crazzed.. think of it this way. Bernank is tuning up his ole whoopty (economy) in the garage and unaware of the deadly carbon dioxide gas (debt) building up around him. He's running wide open throttle (printing like no tomorrow) he's tweeking the fuel/air mix too lean (interest rates anchored to zero) and is about to melt the exhaust valves. The Gold bet is that he will not let up in time and destroy the engine. (fiat system). Should interest rates start to rise the risk of melting the valves disappears and gold gets crushed. So the question is what comes first ? Does he kill himself from the gas? Does he blow the engine? Do rates rise (deflationary collapse) or does he manage to get it all under control in time to avoid either of those outcomes?

I don't wana rain on everybody's Grant-worship-fest here, but he's just like all the other (alleged) realists out there, won't come out and say what's really happening, won't come out and say they're looting the nation dry, stealing all the wealth they can, the silent easy way, printing and currency debasement.

They climb over each other telling us how present policies don't work and can't work, they've been saying it 4 damn years now, we're tired of hearing it, we know damn good and well present policies won't work and can't work, they're not telling us anything we don't already know, they're just getting TV exposure.

I like Grant but just don't get why he pretends the Treasury market is actually a "market", surely he knows better. He talks about people deciding not to buy Treasuries anymore...so what happens then? Do yields go up or does the Fed, with unlimited ability to print, continue to "up the ante" and become a substitute buyer. As long as the USD is accepted as a reserve currency, and the alternative currencies continue in the race to debase, the Fed can just keep printing.